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Academy Health Reinsurance Institute. Update from Rhode Island Anya Rader Wallack, PhD Consultant to the Rhode Island Health Insurance Commissioner July 19, 2007. Rhode Island and reinsurance. Background: where we were 12 months ago? Current environment
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Academy Health Reinsurance Institute Update from Rhode Island Anya Rader Wallack, PhD Consultant to the Rhode Island Health Insurance Commissioner July 19, 2007
Rhode Island and reinsurance • Background: where we were 12 months ago? • Current environment • Implications of 2007 legislative session • Where will we go from here?
Background 2006 Goals: • Stem decline in employer offer rate (not aimed at uninsured) • Target the most at-risk populations 2006 Legislation created: • the Wellness Health Benefit Plan (one for small groups, one for individuals); • the affordable health plan reinsurance program for small businesses; and • the affordable health plan reinsurance program for individuals.
Health Pact RI (formerly known as the Wellness Health Benefit Plan) • Goals: • Create an affordable health insurance product for small business and individuals: Select Care Rhode Island (for Business) and Select Care Direct (for individuals) • Use the Select care product as a platform to begin to address the underlying cost of care in Rhode Island by creating appropriate incentives for all key stakeholders to appropriately control costs • Allow small businesses to leverage the purchasing power of the state in buying the Select Care Rhode Island product • New legislative authority: • Set premium target • Created advisory committee • Gave Health Insurance Commissioner authority to approve/disapprove plan design and rates
Health Pact RI, continued • Intended to create incentives to focus on primary care, prevention, mgmt. of chronic care, ↑ quality, ↓ cost. • Alternative to high deductible plans • Developed with an advisory committee including carrier and consumer reps. • Target individual premium is 10% of average annual statewide wage • Plan has been developed for smG and regs are in process • Direct pay deadline extended to next year • Will be offered beginning October 1, 2007 • Based on a compliant/noncompliant structure – better rates for: • Selection of primary care MD • Completion of health risk appraisal • Weight management • Smoke free or smoking cessation • Disease management
The affordable health plan reinsurance programs • Program 1: Available only to small (fewer than 50 employees), low-wage firms (bottom quartile for RI) • Firm must pay 50% of individual premium • Program 2: Available only to high-risk individuals (those who do no pass medical underwriting) • Both programs: • Only for purchase of Wellness Health Benefit Plan • Discounted premium rate (at least 10% off) • Reinsurance fund subsidizes carrier losses within a prescribed corridor of risk (to be defined in regulation by health insurance commissioner) • Enrollment capped per funds available
Current environment • State fiscal woes: major budget cuts, no new spending • Increase in uninsured from 2001 to 2004 by 12,000: • Almost all below 300% FPL • 32% qualify for Medicaid • Most of remainder “defined out” of large group employer eligibility • Precarious balance in direct pay market: enrollment in “healthy” pool down, cross-subsidization not sustainable • Focus shifted to broader coverage expansion initiative
2007 legislative session • Sources of funds for subsidy: much discussion; premium tax passed and went to general fund for Medicaid gap; insurer-collected bed tax passed but vetoed • Market merger task force: OHIC will oversee a study of the impact of merging small group and direct pay markets • Section 125 plans: employers with more than 25 employees must offer cafeteria plans for tax-free health benefits • Basic plans: insurers can sell mandate-free plans to previously uninsured groups
Where will we go from here? • Address the direct pay crisis: • Applied for CMS grant to fund development of a risk-spreading mechanism for direct pay and possibly small group • Working on merger analysis • Develop lower-cost products: • Rolling out Health Pact RI plans • Monitoring carrier roll-out of basic plans • Develop financing plan for reinsurance/subsidies: • We are examining the use of reinsurance in a range of models, Urban modeling will feed into that process • Analysis should support evaluation of: • Eligibility constraints • Product constraints • New state $ versus risk-spreading among carriers
Possible scenarios for the use of reinsurance • Range of options from narrow to broad • Narrowest: targeted program, ala Healthy NY • Broadest: merged small group and direct pay markets, new rating rules and reinsurance as a risk-spreading mechanism (to reduce carrier risk and spread bad risk equitably) • Options pursued will depend on results of merger study, $ available, estimated costs, state political and fiscal environment